Indian ports to clock 4-5% volume growth in FY24 amid headwinds
Despite disruptions, India was able to improve its overall Logistics Performance Index (LPI) rank in 2023 to 38 (2018: 44, last LPI survey).
Improving operational efficiency, the government's focus on developing downstream logistics infrastructure and stability in freight rates to enable Indian ports to offset the risk of lower volumes and register a 4-5 percent YoY volume growth in FY24 (CAGR 3.5 percent during FY15-FY23).
“Despite the rising risk of lower exports amid an economic slowdown in importing geographies (EU and US), India Ratings and Research (Ind-Ra) expects Indian ports to clock mid-single digit volume growth on an aggregate basis in FY24,” reads the Ind-Ra release.
Despite disruptions to shipping supply chains due to the Covid-19 pandemic in the world, India was able to improve its overall Logistics Performance Index (LPI) rank in 2023 to 38 (2018: 44, last LPI survey). As per LPI 2023 survey, Indian ports’ average dwell time (time container spends in port) between May and October 2022 was 3 days, at par with Singapore’s (No:1 ranked in LPI Index). The agency believes investments in infrastructure, supply chain digitalisation, containerisation of cargo and connecting major ports on both sides of coasts through rail and road infrastructure have significantly improved the efficiency of Indian ports.
As trade lines have opened up and supply chain pressures eased, container freight rates returned to pre-covid levels in 2HFY23. As highlighted by Ind-Ra in the FY24 Outlook: Logistics, normalisation is expected to continue in 3Q-4QFY24. The stability in freight rates is likely to support foreign trade, thus enabling higher cargo volume growth and higher earnings and profitability for Indian ports operators.
India's merchandise exports grew 6.9 percent yoy to USD451 billion in FY23, although the total export volumes fell 13 percent yoy to 16.1 billion tonnes. The signs of slowdown in the EU and US economies mirrors the slowdown in their foreign trade with India. During FY23, the combined EU and US formed 33 and 15 percent of India’s total export value and import value in USD terms, respectively. An extended slowdown or an expected recession in these geographies might hamper India’s cargo volume growth especially in terms of exports.